Mercator: Mobile Payment Card Systems Seeing Fundamental Changes

September 17, 2024         By: Steven Anderson

The payment card market of mobile payments operations is an evolving one, and a report Mercator Advisory Group sent our way makes it clear. While most customers are still turning to physical payment cards, there is a growing market segment that’s pushing for the virtual card instead.

The Mercator report, titled “Consumers and Prepaid: Shifting Toward Digital,” reflects the fact that 56 percent of US adults bought prepaid cards in the year preceding the June 2018 and June 2017 studies. That’s actually down a bit from the previous study, which had physical prepaid cards at 63 percent, but was up from the 2012 study that put them at 47 percent.

Virtual prepaid cards were bought, meanwhile, by 48 percent of US adults, which represents a comparative stagnation over last year, which is the first such stagnation after years of fairly routine growth. Buyers are picking these cards up in a variety of means from a variety of retailers, as retailer cards are the most popular overall at 16 percent. However, retailer-specific cards are still overwhelmingly bought from physical retailers.

Report author Karen Augustine noted “The stagnation in prepaid buying recorded by the latest CustomerMonitor Survey after a dip in 2017 is a continued sign of turbulence in the prepaid market and is confirmed anecdotally by some program managers. The growth of PayPal Mastercard, a current market leader, is shaping the role of prepaid in emerging markets, reaffirming the impact of digital channels on prepaid.”

It likely doesn’t matter so much where customers are buying gift cards so long as they are. O Of course, the problem is as it ever was for businesses; are customers trending away from brick-and-mortar in favor of online operations? That would be an excellent explanation for what’s being seen here, but we have to remember that there’s still a healthy slug of business that favors the physical. Boomers, Gen X, even Gen Z is coming around. With millennials likely buying a lot of virtual cards, that could explain the numbers we’re seeing.

It seems to be the classic story all over again: have a virtual presence for those who prefer it, but not at the expense of those that don’t. With the numbers so clearly split, there’s little better explanation to be had.